How the Credit Score is Used

Example Relating Credit Score to Lending Collateral Ratios

The moving pieces involved in utilizing the DeFi Passport Credit Score are best visualized (below) with a concrete example: consider a single collateralized account, called here a ‘vault,’ with a dynamic collateral ratio set by the vault owner’s DeFi Passport Credit Score. In this case, the Vault (which contains collateral + user’s holdings), passes a set of numbers to a smart contract 'assessor.' The Assessor will request the user’s credit risk on a scale from 0 - 999 from the Credit Score. This score will then be 'mapped' onto a continuous distribution relevant for modifying the Vault conditions through a function called the Mapper. The result is then returned to the Vault in order to return the user’s specific collateral ratio.

Visual of DeFi Passport Credit Score Components

Note the DeFi Passport Credit Score is not a frozen number; it can be updated as needed to provide the most relevant information and a dynamic collateral ratio. This example demonstrates how the DeFi Passport Credit Score in particular adds value to on-chain lending protocols, but this process can be generalized to be integrated with any range of DeFi protocols and their relevant parameters.